BILL ANALYSIS
SENATE COMMITTEE ON PUBLIC SAFETY
Senator John Vasconcellos, Chair S
1997-98 Regular Session B
7
7
SB 777 (Leslie) 7
As introduced
Hearing date: April 22, 1997
Penal Code
LK:js
INTERNET: GAMBLING
HISTORY
Source:Author
Prior Legislation: None
Support: Committee on Moral Concerns
Opposition:California Thoroughbred Breeders Association (as
introduced); California Attorneys for Criminal
Justice
(THIS ANALYSIS REFLECTS AUTHOR'S AMENDMENTS TO BE OFFERED
IN COMMITTEE.)
KEY ISSUE
SHOULD GAMBLING WHICH IS OTHERWISE PROHIBITED ALSO BE PROHIBITED ON THE
INTERNET?
PURPOSE
Existing law provides various criminal penalties for
illicit gambling.
This bill would provide that it is a misdemeanor to use the
Internet to participate in gambling activities which are
otherwise illegal.
The purpose of this bill is to stop illicit gambling
activities which are using the Internet to skirt the law.
COMMENTS
1. Expressed Purpose of the Bill
According to the author:
Gambling, like the other more dubious attractions
of modern life, has rushed wildly to get a piece
of the Internet action in the past few years.
There are hundreds of Web sites devoted to some
form of gambling, and more are being added every
month.
The problem is, on-line gambling, at least in
most parts of the United States, is not clearly
legal or illegal.
The stakes are enormous. Americans shell out
approximately $550 billion a year on gambling,
not just in casinos but at the racetrack, on
sports books and state-run lotteries, in card
rooms, Indian gaming facilities and church-run
bingo halls. It is understandable that Internet
entrepreneurs would want to get in on it.
Many corporations are flaunting existing laws
against casino-style gaming by opening accounts
for betting customers through offshore
subsidiaries. One of them is the International
Gaming and Communications Corporation of Blue
Bell, PA. Since 1992, IGC has enabled its
customers to engage in gaming activity through a
subsidiary, Sports International Ltd. of Grenada,
West Indies, letting the punters place bets using
a toll-free number from anywhere in the world.
IGCos International Sports Book has generated
approximately $50 million annually in telephone
wagers. In May 1995, it accepted its first wager
transmitted over the Internet.
Since then, a number of sites have sprung up
offering sports-book wagering, with offshore
accounts, on the Internet. Some sites use play
money accounts for pretend blackjack, roulette or
slots. IGC, which put a prototype blackjack game
on its Sports Book Web site last summer, wants to
be the first to implement real-money, live
casino-style gaming on the Internet.
In Minnesota, the state is taking on a company
called On-Ramp Internet Computer Services.
Basing its case on consumer protection laws, the
state is accusing the company of misleading
customers by claiming that they can legally bet
through its service, which is based in Nevada
(where gambling is legal). The state argues that
oif people can access the site in a state where
gambling is illegal, itos illegal.o
Existing law, however, is vague. Although it
prohibits using wire communications for
transmitting bets in interstate or foreign
commerce, it does not specifically address the
Internet. Until the law is clarified, most
Internet gambling entrepreneurs seem to consider
themselves immune.
Ignored in the scramble for profits are the
potential societal problems a new explosion of
gambling could cause. And then there are the
regulatory issues: how will states prevent
neophyte Internet gamblers from getting ripped
off by sleazy operators? Who is responsible for
blocking access to minors? What about other
security issues?
Legislation has been introduced at the federal
level by Senator John Kyl, R-AZ. It appears to
be gaining bipartisan support and it looks like
it is supported by the White House as well. (Our
Attorney General had a representative on the
working group which drafted the legislation.)
The legislation would extend criminal penalties
to companies who offer all types of computer
gambling. Further, communications companies
regulated by the FCC would be required to
discontinue services to any companies they carry
that offer gambling.
I am carrying Senate Bill 777 in an attempt to
clarify at the state level that gaming which is
otherwise illegal in California shall not find a
safe haven on the Internet. Individuals who
would otherwise be violating state law by
participating in illegal gaming activity ought
not be granted immunity by shifting the forum to
the Internet.
Senate Bill 777 is a work in progress. It is our
understanding that the United States Supreme
Court in June will be issuing guidelines to the
states for regulation of activity over the
Internet. While it would be my preference to
address the issue of Internet gaming on a broader
spectrum, including under the purview of this
measure those who set up the gaming operations in
question, it clearly would be premature.
However, as Internet sites continue to exist that
provide a forum for this type of activity and the
aforementioned dangers linger, I find it
necessary to proceed in some regard.
Therefore, I have authoros amendments to be
offered in committee which would restrict the
scope of this bill to the individual who places
the bet. Should there be a compelling need to
expand the scope of this measure when guidelines
are provided by the Court, I commit to bring the
bill back to committee for further discussion.
2. Author's Proposed Amendments
The author proposes to strike SB 777 as introduced and
insert a new Section 337j in the Penal Code:
337j. (a) Every person who knowingly uses an
interactive computer service or system to engage
in gaming, to transmit bets or wagers, or to
receive money or credit as a result of gaming or
placing bets or wagers, is guilty of a
misdemeanor.
(b) As used in this section:
(1) oGamingo means to play, for an opportunity
to obtain something of value, the award of which
is determined by chance, any type of game that
the Legislature is prohibited from authorizing
pursuant to either subdivision (a) or (e) of
Section 19 or Article IV of the California
Constitution, or any type of game prohibited and
made unlawful by Chapter 9 (commencing with
Section 319) or Chapter 10 (commencing with
Section 330) of Title 9 of Part 1 of the Penal
Code.
(2) oInteractive computer service or systemo
means an information service, system, or access
software provider that provides or enables
computer access by multiple users to a computer
server, including an information service, system,
or access software provider that provides access
to a network system commonly known as the
Internet, or any comparable system or service.
(c) This section does not apply to the
California State Lottery. However, nothing in
this subdivision shall be construed to make
lawful any activity that is prohibited by Chapter
12.5 (commencing with Section 8880) of Division 1
of Title 2 of the Government Code.
(d) Except as provided in subdivision (c),
this section does not apply to any type of
gambling operation otherwise authorized by law.
(e) Nothing in this section shall be construed
to make lawful any activity that is prohibited by
any other provision of law.
3. General Comments
The scope of the state's ability to regulate the Internet
is unclear. The United States Supreme Court will likely
resolve some issues regarding Internet regulation this
summer. Since the author's intent is to provide for
regulation of the Internet only to the extent that it
impacts on California activities, and activities which are
illegal under existing law, it appears that this bill would
not adversely affect the interests of other states or
nations.
It is likely that the bill will require some amendment
after the Supreme Court reaches its decision. The author
has promised to return this bill to the Committee if it is
substantively amended later in the session.
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